Part 1 -
Irwin is a monopoly seller of specialty bearings. Considerthe graph to the right, which illustrates the demandand marginal revenue curves for Irwin's30-weight ball bearings, along with the marginal andaverage total costs of producing bearings:
a. Find the monopolist's profit-maximizing level of output.
b. Determine the price the monopolist should charge to maximize profit.
c. Draw an appropriate rectangle on your graph to represent the total revenue the seller receives from selling the profit-maximizing quantity of bearings at the profit-maximizing price.
d. Draw an appropriate rectangle on your graph to represent the total cost of producing ball bearings.
e. The difference in the areas you drew in (c) and (d) represents profit. Calculate the profit Irwin earns from selling 30-weight ball bearings.
Draw each one individually.
Part 2 -
Answer the following questions.
1. Explain whether government spending on space explorationis an injection or withdrawal from the economy. Does your answer change if all increase in space exploration pays for USA produced hardware? (Define before explaining)
2. If private investment fell by £20 billion while GDP remained the same, which of the following could have occurred, all else being the same?
(a) Exports fell by £20 billion
(c) Taxes fell by £20 billion
(c) Consumption spending increased by £20 billion
(d) The Bank of England decreased the interest rate to 0%
3. As a nation's GDP increases, that nation's
(a) autonomous consumption decreases
(b) imports increase
(c) exports increase
(d) autonomous consumption increases (M=C+my)
4. What is the effect on national income if savings increase?(use keynesian cross+ad/as curve)
5. What is likely to happen to national income if aggregate demand exceeds aggregate supply?(relation to wages, long run and short run answers)
6. In the figure below, when disposable income is £600 billion, saving equals
(a) zero
(b) disposable income
(c) consumption
(d) £120 billion
7. When the consumption function lies above the 45-degree line, households
(a) spend on consumption a decreasing percentage of any increase in income.
(b) save all of any increase in income.
(c) are dissaving.
(d) spend on consumption an increasing percentage of any increase in income.
8. In the diagram below, the multiplier is
(a) 1.5
(b) 2.0
(c) 3.0
(d) 2.5
9. It is difficult for cyclically unemployed persons to find jobs because
(a) they typically do not meet the qualifications required for the available jobs
(b) the economy is in a recession
(c) they voluntarily quit their last jobs and employers may view them as unreliable
(d) they typically have not looked long enough to find a job.
10. Which of the following types of unemployment increases when the economy goes into a recession and decreases when the economy goes into an expansion?
(a) structural unemployment
(b) seasonal unemployment
(c) cyclical unemployment
(d) frictional unemployment
Add definitions, reasons and thoughts to every question.